Clorox buys back Henkel's 29% stake

Exchanges businesses, cash for 61.4 million shares

By

RussBritt

LOS ANGELES (CBS.MW) -- Clorox Corp. said late Wednesday it will buy back Henkel KGaA's 29 percent stake in the company in exchange for several businesses and $2.1 billion in cash.

Oakland, Calif.-based Clorox
CLX, -0.79%
will create a subsidiary that includes its insecticides business, Soft Scrub cleansers and the company's 20-percent interest in a joint venture with Henkel (604843), known as Henkel Iberica. The businesses were deemed to be worth $745 million.

Those businesses and the $2.1 billion in cash -- also part of the subsidiary, a spokeswoman said -- all will go to Henkel in exchange for that company's 61.4 million shares in Clorox.

Henkel is making the deal to finance its takeover of Dial, completed in March. Both companies previously said publicly that such a deal was in the works.

"Reacquiring the shares from Henkel, we think, is a great investment for shareholder value," said Clorox spokeswoman Kathryn Caulfield.

Based on Clorox's closing price Wednesday of $54.31 -- up 61 cents for the day -- Henkel's stake is valued at $3.3 billion. The estimated value of the businesses and cash outlay means Clorox is paying $2.8 billion for the shares, roughly a 15-percent discount.

The deal is expected increase Clorox's earnings per share by a range of 7 cents to 10 cents during fiscal 2005. That excludes a gain recognized on transfer of the businesses and the investment in Henkel Iberica. Henkel Iberica is a consumer products operation in Spain and Portugal.

The subsidiary being transferred to Henkel will result in the transfer of 135 workers, Clorox said.

Clorox said it will fund the transaction with existing cash, plus the issuance of commercial paper to provide the $2.1 billion in cash that is part of the deal. After closing, Clorox said it will issue $1.5 billion to $1.7 billion in long-term debt to reduce commercial paper balances.

Caulfield said the company is divesting of some of its non-core operations. As a result, Clorox will sever its ties with Henkel, which date back to 1974.

Since that time, Henkel has owned stakes in Clorox ranging from 15 percent to the 29 percent it holds, Caulfield said.

Caulfield said the deal should be complete within 60 days.

Henkel adhesives deal

Separately, Henkel Corp., a U.S. affiliate of Dusseldorf, Germany-based Henkel KGaA, said it has agreed to buy adhesives and sealant supplier Sovereign Specialty Chemicals for $575 million, including debt and liabilities.

Henkel is buying the shares of the Chicago-based company from an investor group led by AEC Investors LLC.

The transaction, which remains subject to customary closing conditions, including approval from antitrust authorities, is expected to close by the end of 2004.

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